Picking on Paul Krugman: Conservatives Have No Problem With Big Government

I don't often disagree with Paul Krugman these days but I do have to take him to task for buying into the "conservatives don't like government" line. In a blogpost he notes that a Republican health care bill in the House would take away funding for the Agency for Healthcare Research and Quality and any economic research funded by the National Institutes of Health. He then concludes by commenting:

"You sometimes hear conservatives saying that the role of government should be limited to the provision of public goods; obviously I don’t agree. But it turns out that they hate providing public goods, like research, too."

Okay, there is a consistent pattern in the behavior of conservatives and it has nothing to do with a dislike of public goods or even a dislike of government intervention in the economy.

What is the quintessential public good? That's right, the military. Do we see conservatives like Mitt Romney and Paul Ryan yelling about waste in the military and the need to pare it back? I surely haven't.

So why are they willing to spend so much money on one set of public goods, the military, but hate the thought of spending relatively trivial sums on the Agency for Healthcare Research and Quality or the economic research funded by the National Institutes of Health?

Let's think for a moment about who benefits. Yes, defense contractors make lots of money selling overpriced and often useless hardware and services to the military. While private contractors may get some nickels and dimes out of the Agency for Healthcare Research and Quality or economic research funded by the National Institutes of Health, you won't find the big bucks there. In fact, one result of the research funded by these two agencies might be that insurers, drug companies, medical equipment suppliers and other big corporate interests may find the usefulness or cost of their products called into question. That could lead to lower profits.

In other words, the most obvious story here is not that conservatives are opposed to public goods. Rather they are opposed to public goods that could have the effect of less income being redistributed upward.

The desire to use the government to redistribute income upward is a theme that pervades conservative politics more generally. They don't object to big government, they object to government programs that help poor and middle class people.

To take my favorite example, government-granted patent monopolies raise the cost of prescription drugs by close to $270 billion a year (1.8 percent of GDP) compared to what we would pay in a free market. A government that enforces this monopoly is every bit as big as a government that taxed people $270 billion and sent checks of this amount to the drug companies. Yet, we let the conservatives get away with this huge transfer and pretend this is just the free market.

Such interventions can be found almost everywhere. Copyright laws are similar in raising prices and now require third parties to play an active role in enforcement. The Stop On-Line Piracy Act, supported by most leading conservatives, would have carried this much further.

Too big to fail insurance, provided by the government to large banks, is a subsidy that runs as large as $60 billion a year by some estimates. This subsidy is not qualitatively different from taxing people $60 billion a year in order to send big checks to Lloyd Blankfein, Jamie Dimon and the rest of the gang.

And, a central bank that raises interest rates with the idea of throwing workers out of their jobs, in order to put downward pressure on wages to keep inflation under 2.0 percent, is also big government. In this case, the government is forcing workers to sacrifice paychecks in order to reduce the risk of inflation.

We could say that these and other interventions that favor the rich are just rules of the game, but that is playing into the right's hands. Yes, they are rules of the game, but they are rules that could easily be set differently.

If we let the right rig the rules in ways that redistribute income upward and then are forced to argue for government interventions to partially reverse the bad effects, then we have lost. At least in the United States, arguing the case for big government is like arguing the case for killing puppies. (Don't anyone dare try it on my blog!)

It makes much more sense, as both politics and policy, to argue against rules that are rigged to redistribute income upward. In addition to being regressive, these rules are often horribly inefficient, as anyone reading the constant stream of stories about drug company scandals would know.

This is the whole point of my book, The End of Loser Liberalism: Making Markets Progressive. You don't have to agree with the whole story to agree with the basic point. We are not fighting over big or little government. We are fighting over whether government should serve the interests of the one percent or the broader population. We are doing the right's work for them when we allow them to pretend that the debate is over the principle of limited government.